Somnigroup International Inc. (SGI)

Somnigroup International Inc.'s liquidity ratios indicate the company's ability to meet its short-term financial obligations.

1. Current Ratio: The current ratio measures the company's ability to pay its short-term liabilities with its short-term assets. Somnigroup's current ratio fluctuated over the years, starting at 1.16 in December 2019, decreasing to 0.99 in December 2020, and then improving to 1.21 in December 2021, 1.22 in December 2022, and holding steady at 1.21 in December 2023. While the current ratio has generally improved, it dipped below 1 in 2020, indicating potential liquidity concerns during that year.

2. Quick Ratio: The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. Somnigroup's quick ratio was lower compared to the current ratio, ranging from 0.46 in December 2020 to 0.68 in December 2021, and then stabilizing around 0.50 to 0.58 in the following years. This indicates that the company may have difficulty meeting its short-term obligations using only its most liquid assets.

3. Cash Ratio: The cash ratio assesses a company's ability to cover immediate liabilities with its cash and cash equivalents. Somnigroup's cash ratio remained relatively low throughout the years, with values ranging from 0.07 to 0.29. The notable increase to 0.29 in December 2021 suggests an improved ability to cover short-term obligations with readily available cash, although the ratio returned to lower levels in the subsequent years.

In summary, while Somnigroup International Inc. has shown improvements in its liquidity ratios over the years, with the current ratio generally above 1 indicating sufficient short-term assets to cover liabilities, the quick and cash ratios suggest a more cautious assessment of the company's ability to meet short-term obligations, especially during periods with lower levels of liquid assets. Further monitoring and analysis of these ratios are advisable to ensure the company maintains adequate liquidity for its operational needs.

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Additional liquidity measure

The cash conversion cycle of Somnigroup International Inc. has shown fluctuations over the past five years.

In December 2019, the company's cash conversion cycle was 45.54 days, indicating that it took approximately 45.54 days for the company to convert its investments in inventory and other resources into cash inflows from sales.

By December 2020, the cycle had improved to 35.94 days, suggesting that the company was able to manage its working capital more efficiently and convert its resources into cash more quickly.

The trend continued in December 2021, with the cash conversion cycle further decreasing to 35.25 days, indicating even better management of working capital and a more streamlined conversion process.

However, in December 2022 and 2023, there was a significant increase in the cash conversion cycle to 56.16 days and 56.23 days, respectively. This rise may imply that the company faced challenges in managing its working capital efficiently, leading to a longer time to convert resources into cash inflows.

Overall, the fluctuation in Somnigroup International Inc.'s cash conversion cycle over the years suggests variations in the company's ability to manage its working capital effectively and efficiently. Further analysis of the underlying reasons for these changes would be necessary to understand the company's operational performance and financial health comprehensively.